Legislative Updates – November 2009

Capitol Call

If the month of September was a trot for Congress, October was a full-on sprint. After months of debate and dozens of hearings, the House Financial Services Committee (HFSC) finally took action and marked up several pieces of its proposed financial regulatory overhaul legislation in just three weeks.

Earlier this year there was much speculation on whether the House would pass its version of regulatory reform piecemeal or all at once. HFSC Chairman Barney Frank (D-MA) decided last month to mark up and pass his bills out of the Committee one issue at a time, starting with the creation of a Consumer Finance Protection Agency, moving on to a bill regulating the OTC Derivatives markets and finishing up in October with the Investor Protection Act.

Additional segments of financial regulatory reform legislation have been marked up in November, including the Financial Stability Improvement Act. The ultimate goal is to combine all of these individual bills into one giant bill that the full House of Representatives will debate and vote on sometime in December.

The Senate, however, has been moving slower and Senate Banking Committee (SBC) Chairman Chris Dodd (D-CT) just recently released his own draft bill that is significantly different than Chairman Frank’s version. He is expected to mark up his regulatory reform bill out of his Committee sometime in December. While the House and Senate may pass their own versions of regulatory reform this year, it is unlikely that there will be a final product signed into law by President Obama until 2010.

On October 16th, the SEC and CFTC released their long-awaited harmonization report identifying areas where the agencies' regulatory schemes differ and recommending actions to address those differences. The agencies came up with 20 “recommendations to enhance enforcement powers, strengthen market and intermediary oversight and improve operational coordination.” One of those 20 recommendations addresses the issue of portfolio margining and suggests that Congress consider “legislation to facilitate the holding of (i) futures products in an SRO securities portfolio margin account and (ii) securities options, SFPs, and certain other securities derivatives in a futures portfolio margin account.”

It is noteworthy that Section 510 of the Investor Protection Act amends SIPA to include language consistent with the Agencies’ recommendation. The options exchanges and OCC sent a letter to the HFSC expressing their support for inclusion of Section 510 in the final version of the bill.

Finally, the CFTC has a full roster of Commissioners with the October 9 Senate confirmations of Commissioners Bart Chilton, Jill Sommers and Scott O’Malia. Mr. Chilton and Ms. Sommers were already Commissioners, but their terms had expired and their new full terms required Senate confirmation. Mr. O’Malia replaced former Commissioner Walt Lukken who resigned to join NYSE Euronext. Mr. Chilton’s term as commissioner expires in 2013, Ms. Sommers’ in 2014 and Mr. O’Malia’s in 2015.

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This web site discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this web site is to be construed as a recommendation to purchase or sell a security, or to provide investment advice.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options (PDF). Copies of this document may be obtained from your broker or from any exchange on which options are traded or by contacting The Options Clearing Corporation, One North Wacker Dr., Suite 500 Chicago, IL 60606 (1-800-678-4667).